The concept of psychosexual development began with Sigmund Freud when he developed his theories of psychoanalysis in the late 19th and early 20th centuries. In the development of his theories, Freud's main concern was with sexual desire, defined in terms of formative drives, instincts and appetites that naturally determined one's behaviours and beliefs, even as those behaviours and beliefs are continually repressed.

Freud also believed that the libido developed in individuals by changing its object, through the process of sublimation. He argued that humans are born polymorphously perverse, meaning that any number of objects could be a source of pleasure. Following a biological logic, Freud established a rigid model for that "normal" sexual development of the human being, or the "libido development". Each child passes through five psychosexual stages. During each stage, the id focuses on a distinct erogenous zone on the body. According to Freud, suffering from trauma during any of the first three stages may result in fixation, which could give rise to a sexual fetish (or paraphilia). Freud related the resolutions of the stages with adult personalities and personality disorders.

Despite their popularity among psychoanalytical psychologists, Freud's psychosexual theories are commonly criticized as sexism, for example, Freud stated that young females develop "penis envy" toward the males during their psychosexual development. In response, Karen Horney, a German Freudian psychoanalytic, argued that young females develop "power envy" instead of "penis envy" toward the male. It should be noted that some of the views expressed in his model have since been disproved or modified, and therefore much of this information is only of historical value.

Terminology associated with Freud's stages of psychosexual development is culturally fashionable in American society, for example, commonly people refer to others with obsessive compulsive disorder as anal.

From birth to approx. 18 months the child is in the oral stage. Here they are primarily focused on the mouth and lips this includes sucking and feeding. If the child feels frustration due to feeding being restricted or late, they can become fixated on this stage. In adulthood this can develop into pessimism, envy, suspicion and sarcasm. If food is given too readily and overindulgence occurs, the fixation can result in optimism, gullibility, and admiration for others in later life. In both cases the adult oral character can often find themselves eating or drinking excessively, thumb sucking or even smoking as a release for their oral energy.

From 18 months to 24 months the child is in the anal stage. In this stage they are learning to control the expulsion of faeces so the libidinal energy is focused in their bowel movements. Two types of characters can develop from this. The expulsive character would have been prone to malicious excretion either just before they were placed on the toilet or just after they were removed from the toilet. In this case the expulsive characters can develop if the parents are too lax with discipline. In adulthood it can result in messy or disorganised people who are reckless, careless, and defiant.
The retentive character takes pleasure in holding in the faeces in spite of the parents training. These people develop into neat, organised, careful, meticulous, obstinate people often mean with money who are passive-aggressive.

At 24 months to about 48 months the libidinal energy shifts from the anal region to the genital region. This is where the Oedipus or Electra complex is developed. The young boy falls in love with his mother and wishes that his father was not in the way of his love (the Oedipus Complex). At this point he notices that women have no penis and fears that the punishment of his father for being in love with his wife, may be castration. This fear is enhanced if he is shouted at for masturbation at this stage. Once the fear of retaliation has subsided the boy will learn to earn his mother's love vicariously by becoming as much like his father as possible. This is where the superego stems from. He will adopt his father's beliefs and ideals as his own and move on to the latency stage.

Girls similarly fall in love with the father and wish the mother was not there (the Electra Complex). They also notice that women do not have a penis, they feel angry at their mother for their perceived castration and develop penis envy. According to Freud, women never really leave this phase and so the super-ego is less developed and consequently women have fewer morals than men. However, the girl will also learn to love the father vicariously through becoming like her mother and then move into the latency stage.

A fixation on this stage will produce reckless, resolute, self-assured, vain, proud people and Freud believed that this could be the root of homosexuality. They can show both signs of promiscuity or asexuality, amorality or puritanism. They flip between the behaviours according to the doctrine of opposites. If the conflict is never resolved the adult can be afraid of or even incapable of developing close loving relationships with other people.[citation needed]

The latency stage lasts from the end of the phallic stage until puberty. This is not actually a psychosexual stage; it is where the libido lies dormant, allowing the child to develop same sex friendships and to focus on school and athletics. It is the ultimate in sexual repression.

The genital stage starts at puberty, allowing the child to develop opposite sex relationships with the libidinal energy again focused on the genital area. According to Freud, if any of the stages are fixated on, there is not enough libidinal energy for this stage to develop untroubled. To have a fully functional adulthood, the previous stages need to be fully resolved and there needs to be a balance between love and work.

It is important to note that anyone can become arrested at or insufficiently grow out of any of the primal stages, leading to various symptoms in one's adult life.

Freud's theories were decidedly masculine, which is why he has received a great deal of criticism from Feminists. Freud had difficulty incorporating the female's desires into his theories, and even stated late in his life, "psychology too is unable to solve the riddle of femininity". Freud argued that young girls followed more or less the same psychosexual development as boys. Whereas the boy would develop a castration complex, the girl would go on to develop penis envy, "the envy the female feels toward the male because the male possesses a penis." (Shultz 66) After this stage, the woman has an extra stage in her development when the clitoris should wholly or in part hand over its sensitivity and its importance to the vagina. The young girl must also at some point give up her first object-choice, the mother, in order to take the father as her new proper object-choice. Her eventual move into heterosexual femininity, which culminates in giving birth, grows out of her earlier infantile desires, with her own child taking place of the penis in accordance with an ancient symbolic equivalence. Freud wrote: "girls feel deeply their lack of a sexual organ that is equal in value to the male one; they regard themselves on that account as inferior and this envy for the penis is the origin of a whole number of characteristic feminine reactions" (Freud 1925 quoted in Shultz 67).